Mirfin, group director at Key Retirement Solutions said that while it remains to be seen whether new providers will enter the market this year, there could be “new funding for existing lenders through third parties.”
He said: “The biggest barrier to launch for a new lender are time, resources and money but with actuarial support those barriers can be broken down to make it easy for people to come into the market.”
Mirfin added interest-only lifetime mortgages, similar to the Halifax retirement home plan pulled from the market last year, could also return to the market.
The Halifax product provided an alternative to the equity release roll-up scheme. Whereas an equity release balance will increase over time, the Halifax retirement home plan always maintained the same balance as the borrower paid interest on a monthly basis.
Ian Wilson, head of sales at Halifax for Intermediaries told Mortgage Solutions last year that one of the reasons it withdrew the product was because not enough parties had joined in the market.
Mirfin added that there is pressure against interest-only lending because of the proposals outlined in the Mortgage Market Review. However, some providers like Stonehaven have found a way to provide a serviceable interest-only loan to clients, he said.
“The interest select scheme from Stonehaven is unique among interest-only mortgages as the total outstanding balance does not change. Instead of the interest rolling up like traditional equity release schemes, the interest on the Stonehaven product is paid monthly by direct debit. Even if the borrower defaults on the loan, it just rolls up so it is a low-risk loan.”
Mirfin added that interest-only loans would be one area of the market he expects to see developments in this year.
Research from Key Retirement Solutions showed total equity release funds released rose 5.4% to nearly £960m last year, while total plans saw a rise of 1.6%.
It also found that there is still £343m of untapped funds available that people have not yet drawndown.
